In Part I of this two-part series we looked at what a faster close looks like and how YOU can get there. In addition. we talked about the need for speed (Thanks Tom Cruise). In part II, we look at the obstacles that might prevent you from “getting there.”
The road map begins with asking the question – Where to? Many companies aim to get to a close and distribute in less than seven business days, some in five, and some world class organizations can come in under the three-day mark. The journey should begin with an assessment of the current state, which includes understanding sequencing, policies and procedures, technologies, and roles and responsibilities. This assessment should fit rationally with the current close calendar and provide insight into critical path activities and decision points.
Next, determine the ultimate destination on where you seek to end up. A twelve-day close and distribution of results whittled down to a four-day close/distribution is quite a journey. Identify the gaps and bottlenecks within the process. A twelve to four day close doesn’t happen overnight. In fact, most organizations create a stair-step down approach (i.e., twelve to ten, ten to seven, etc.,) using a scorecard to measure key metrics that drive the close cycle to the optimal length. Each shortening is the result of remedying of one or more gaps that are well defined and mitigated.
The gaps are likely across four areas:
First, cultural norms (aka people). Acceptance that ‘we’ve always done it this way’ comes with a litany of defenses behind why it cannot be shortened. Change is daunting, and many people see personal loss within it – either more work, loss of responsibility or role, diminished influence, or learning new skills (which can be time consuming). People are concerned that machines are coming for their jobs. Unfortunately, this isn’t the case. Throughout history, humans have partnered with technology to work faster and better, and in the process innovation and personal growth occurs. A great example of this would be the finance and accounting company, FYIsoft® which is solely focused on delivering finance software that dramatically simplifies the financial reporting and analysis processes, even in complex environments.
Second, is process. Established rules, defining requirements and scorecards for accounting flow lead to a standardized close and distribution process. Much of the process is tied to policy – and given the permanence of working remotely, tracking down approvers, facilitating review, and approving elements of the financials is getting more complicated unless workflow technology is enabled within the close process. Additionally, organizations are becoming more complex through growth, strategic realignment, and M&A. This can result in new product lines, profit centers, geographic disparity, customer divisions – and reliance upon more stakeholder validation which adds more work, which stretches the timeline.
Third is technology. While the ERP system that an organization uses is part of the solution framework to this type of transformation, a more important factor is fast consolidation and distribution of the reporting. Easy, single click dis-aggregation of the right information to the right stakeholders at the right time is the ultimate goal. Many organizations continue to suffer with overnight report cycles, manual distribution processes, and a heavy reliance on Excel to disseminate financial reporting. Additionally, technology that allows users through easy to use drill down capabilities is massively empowering to see the ‘event’ causing the variance. Many impediments to quick close and distribution can be tied back to the pain of consolidating multiple GLs (a hangover from M&A growth) combined with too many reporting units. The right technology solution layers or bolts on to your ERP system to enhance your technology portfolio.
Finally, fear of loss of accuracy and detail. After all, the more time an Accounting Department has to reconcile, fact check, double check, and cross check the data – the more confidence there will be behind the distributed numbers. Thoughtful accounting processes that can be directed into a single automated workflow with assigned tasks that do not create bottlenecks can ensure that the product at the end of the flow is reliable and trustworthy. In fact, a survey from Akili (an information technology consultant), says that 40% of executives blame slow closing speeds on internal levels of review, while 20% say even more time is needed to check for errors.
All of this caution of course is to avoid doubt of the quality or accuracy of the financial statements, the costly rework when errors are discovered, and ultimately the risk of misstatement of Financial Results to the board, or worse, to external parties. Once again, alignment of people and processes with the right technology can alleviate ‘error anxiety’ and reduce this time-consuming bottleneck.
In closing, the right technology should be able to integrate multi-entity and/or system reporting, simplify the painful process of report distribution in a secure environment, and provide stakeholders perfectly formatted financial reporting on demand. Oftentimes, the core impediment to faster closing is the reporting tool. Unless of course you are using a product like, wait for the shameless plug, ReportFYI. 😊